Retail sales expectations hit 27 year high

Retail sales volumes have performed so strongly in the year to May that the Confederation of British Industry has declared expectations for June to be at a 27-year high.

The latest quarterly Distributive Trades Survey says that orders placed upon suppliers rose more quickly than anticipated in the year to date – the fastest pace since December 2010.

Sales were also well above average for the time of year, representing the best results since April 2007.

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The survey of 134 firms including 63 retailers showed that growth in both the volume of retail sales and orders exceeded expectations in May. Firms remain optimistic that both sales and orders are set to rise at an even stronger pace in the year to June.

Employment stabilised in the year to May, with a slight pick-up expected next month, while pricing pressures eased with average selling prices rising only moderately. Firms are also more positive about their business situation for the coming quarter, although investment intentions for the year ahead remain in negative territory for the second quarter running.

Internet sales volumes rose firmly again in the year to May. However the rate of growth eased off slightly on the previous month, and fell back below its long-run average.

Elsewhere, 51% of wholesalers reported sales volumes to be down on last year and 14% said they were down, giving a balance of +36%. Employment growth moderated (+5%) following a year of strong growth, with expectations for further modest growth in June (+8%).

Rain Newton-Smith, CBI director of economics said: “Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead.

“Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.

“Overall the outlook is bright for firms on the high street, but challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector. And investment plans have also taken a hit.”